Duty of Distribution Companies to Clear Gencos Dues: Suresh Prabhu

Former energy minister Suresh Prabhu has said it is the sacrosanct duty of the Distribution Companies to clear dues owed to the Gencos

It was a pleasure to speak at the “Re-energising India after Pandemic” #webinar organised by @CEEWIndia where I discussed about global challenges in #energy sector,as we enter very uncertain global scenario.

— Suresh Prabhu (@sureshpprabhu) May 21, 2020

 Batting for power generators, former energy minister Suresh Prabhu on May 21, 2020, said it is the sacrosanct duty of the Distribution Companies (Discoms) to clear dues owed to the Generation Companies (Gencos) and the state governments should ensure the same. At present, Discoms owe over Rs 92,000 crore to the power generators, largely in the private sector, which is severely impacting the power industry.

“Till 2000 when power was largely controlled by the public sector, things were different. However, over the period we witnessed large investments from the private sector.

“If these power producers don’t get the returns on their investments, they will not produce power. We cannot let the power industry, as well as the generators, go bankrupt,” Prabhu, who is India’s G20 and G7 sherpa, said during an online seminar organised by the Council on Energy, Environment and Water (CEEW).

He said government-owned Gencos can continue generating power as they are backed by the Central and state governments, but the same is not the case with private players.

“The investments made by the private sector helped India become power surplus. It is therefore the sacrosanct duty of the Discoms to pay them the dues. We cannot have this approach that we will buy power but not pay for it. I feel the state governments should also play a key role in ensuring the dues are paid,” he added.

Citing a tripartite agreement signed between the RBI, and central and state governments in 2016 under which the Centre can withhold financial assistance to states in case of default by state-owned discoms, Prabhu said, “We have never invoked this, but there has to be some solution to ensure Discoms pay the dues.”

Prabhu further went on to say that the state and central electricity regulators must be made accountable to ensure profitability, solvency, viability and cash flow of the generators.

Finance Minister Nirmala Sitharaman recently announced a credit line of Rs 90,000 crore through PFC and REC to Discoms in state-guaranteed loans to clear the dues they owe to the power generating and transmission companies. According to the announcement, the Central Public Sector Generation Companies shall give a rebate to Discoms which shall be passed on to the final consumers (industries).